Example Trade Discount allowed

Example Trade Discount allowed

Trade discount on sales are known as trade discount allowed .Trade discount allowed like trade discount received not recorded in the books of accounts rather sales are recorded in books of account net of trade discount. Trade discount is offered at the time of sales are made to the customer.

Example Trade Discount Allowed

ABC & Co made sales of shoes of $ 2,000 on cash from XYX & Co. Trade discount of 5% on the sales was allowed to the XYZ & Co. what would be the entry for the discount allowed by the ABC & Co.

Solution

The purchases will be recorded at net amount i.e. $ 1,900 ($ 2000- $100).

Date	Particulars	Dr	Cr
11 Nov ,2014	Purchases a/c	1,900
11 Nov ,2014	Cash a/c		1,900